World Bank: Nigeria’s Growth Recovery Still Fragile as Oil Production Remains Subdued

*22 African countries at high risk of external debt distress 

*Prescribes debt reduction, domestic revenue mobilisation strategies  

Ndubuisi Francis in Abuja

The World Bank yesterday declared that Nigeria’s 2.8 per cent projected growth recovery for 2023 was still fragile as oil production remains subdued, despite rallying to over 1.6 million barrels per day (bpd) recently.
In the latest ‘Africa’s Pulse,’ its April 2023 economic update for Sub-Saharan Africa, the World Bank also revealed that 22 countries in the region were at high risk of external debt distress or already in debt distress as of December 2022.

The World Bank report observed that growth across Sub-Saharan Africa remains sluggish, dragged down by uncertainty in the global economy, the underperformance of the continent’s largest economies, high inflation, and a sharp deceleration of investment growth.

It stated that economic growth in Sub-Saharan Africa was set to slow from 3.6 per cent in 2022 to 3.1 per cent in 2023.
Commenting on the new report which was released yesterday, the World Bank Chief Economist for Africa, Andrew Dabalen, said: “Economic activity in South Africa is set to weaken further in 2023 (0.5% annual growth) as the energy crisis deepens, while the growth recovery in Nigeria for 2023 (2.8%) is still fragile as oil production remains subdued.

“The real gross domestic product (GDP) growth of the Western and Central Africa sub-region is estimated to decline to 3.4 per cent in 2023 from 3.7 per cent in 2022, while that of Eastern and Southern Africa declines to three per cent in 2023 from 3.5 per cent in 2022.
“Weak growth combined with debt vulnerabilities and dismal investment growth risks a lost decade in poverty reduction.”  
Dabalen urged policy makers to redouble efforts to curb inflation, boost domestic resource mobilisation, and enact pro-growth reforms, while continuing to help the poorest households cope with the rising costs of living.

Emphasising that debt distress risks remain high with 22 countries in the region at high risk of external debt distress or in debt distress as of December 2022, it affirmed that unfavorable global financial conditions had increased borrowing costs and debt service costs in Africa, diverting money from badly needed development investments and threatening macro-fiscal stability.  
Stubbornly high inflation and low investment growth continue to constrain African economies, it stressed, adding that
While headline inflation appears to have peaked in the past year, inflation is set to remain high at 7.5 per cent for 2023, and above central bank target bands for most countries.

The report also revealed that investment growth in Sub-Saharan Africa fell from 6.8 per cent in 2010-13 to 1.6 per cent in 2021, with a sharper slowdown in Eastern and Southern Africa than in Western and Central Africa.
Despite these challenges, many countries in the region are showing resilience amidst multiple crises, the report pointed out.

These include Kenya, Cote d’Ivoire, and the Democratic Republic of Congo (DRC) which grew at 5.2 per cent, 6.7 per cent, and 8.6 per cent respectively in 2022.
In the DRC, the mining sector was the main driver of growth due to an expansion in capacity and recovery in global demand. Harnessing natural resource wealth provides an opportunity to improve fiscal and debt sustainability of African countries, but the report cautioned that this can only happen if countries get policies right and learn the lessons from the past boom and bust cycles.  

World Bank Senior Economist, James Cust said: “Rapid global decarbonisation will bring significant economic opportunities to Africa.
“Metals and minerals will be needed in larger quantities for low carbon technologies like batteries—and with the right policies—could boost fiscal revenues, increase opportunities for regional value chains that create jobs, and accelerate economic transformation.”
The report further stated that in a time of energy transition and rising demand for metals and minerals, resource-rich governments have an opportunity to better leverage natural resources to finance their public programs, diversify their economy, and expand energy access.

Countries could potentially more than double the average revenues that they currently collect from natural resources, it added.
“Tapping these fiscal resources in the form of royalties and taxes while continuing to attract private sector investment requires the right kinds of policies, reforms, and good governance.
“Maximising government revenues derived from natural resources would offer a double dividend for people and planet by increasing fiscal space and removing implicit production subsidies,” the report stressed.